A changing landscape

For many people, one of the most difficult purchasing decisions is how to find the right lawyer on the occasions in life when that becomes necessary. Often those occasions will be stressful – for example around divorce, or employment, or a contractual dispute. The legal problem might be fairly routine, for example a simple conveyance, or it might be a complex family law or employment matter with relationships or livelihoods at stake. For a customer of a lawyer the need to have some comfort that the advice is reliable is paramount. There is often anxiety over costs that might be incurred.

Historically, the legal services market has felt stubbornly opaque to even the most informed and assertive of consumers. Barriers to entering the market have left orthodox business models unchallenged, arguably having a dampening effect on consumer choice and quality. Today, historically, we begin to see the landscape change as the first Alternative Business Structures (ABS) open their doors to customers.

Opening up the market ends the position where non-lawyers were prevented from owning a stake in law firms. The Legal Services Board (LSB) was established just three years ago with a specific mandate to increase competition to benefit consumers. As a result of these changes, we expect many existing law firms to adjust their practices to become more outward-looking, more imaginative in the packages that they offer, and for a less expensive range of services to be provided in the face of competition. We envisage the cross-fertilisation of existing practices with new thinking from other sectors. Importantly, we should begin to see a more responsive market place where consumers will receive better advice on what is available to them and at what price.

This reform has been about removing restrictive practices that were underpinned by an outdated perspective on consumer protection. It is about new ways of working and stimulating innovation in the sector. As we have built the regulation, our priority has been to create a safe licensing framework that does not put the customer at risk. More than any of this, the reform has been motivated by the desire to widen access to justice for consumers in England and Wales.

For practitioners, the benefits are real. Law firms will be able to attract external capital and new forms of investment. There is great potential for joint-working as, if lawyers choose to do so, they can form new collaborative partnerships with other service-providers, such as insurers or accountants. Coming together to create packages of professional services can enhance their appeal to consumers and widen what they have to offer – potentially through a one-stop shop model.

Practitioners have much to gain from the new arrangements.

But, for all the legions of column inches devoted to this subject across the legal press, these reforms are less about lawyers and more about consumers. The old ownership restrictions created artificial monopolies. For many consumers, this meant that engaging a lawyer was unaffordable, or at least felt unaffordable.

While legal aid provides support for at least some in the civil area, vast swathes of consumers feel financially barred from engaging legal support. The extent of restricted access to justice can be measured in the number of justifiable claims never brought, or those pursued chaotically by litigants in person. Research carried out by the LSB in 2009 found that 20% of respondents said they had not sought legal advice even though they considered it would have been beneficial. The most common reason by far was cost, with 54% of respondents agreeing that legal advice was ‘too expensive’. The next most popular answer was ‘because I don’t know enough about how the process works’ (20%). For these people, lack of access to justice isn’t a public policy concern. It’s been a fact of life.

We expect ABS to widen access to justice. The new competitive pressures and impetus towards innovation should increase the availability and reach of legal services. As services are delivered more flexibly, providers will find ways to bring the prices down both for consumers.

Importantly, though, these changes are just the beginning in building a legal services marketplace that works better for consumers. The marketplace is likely to become characterised by greater plurality. But greater choice does not necessarily lead to more empowered consumers. Almost four-fifths of consumers who have used legal services, according to LSB research, did not shop around. Too often we find that consumers have little or no experience of the skills and experience of different lawyers, and typically lack the ability to judge their quality.

Consumers need information and data if they are to be genuinely able to make choices based on issues such as price, quality and outcome. Greater competition is likely to lead to novel and innovative ways of connecting consumers with services. The more diverse market will put pressure on firms to differentiate their activity from competitors and quality, accessibility and price comparisons to influence purchasing behaviour. Consumers will reward the firms that make this easier for them.

Today the Council for Licensed Conveyancers (CLC) will begin to license individual ABS. This day is significant because it marks the point when clauses in a statute finally become real businesses delivering services to real clients. This will be followed at the turn of the year when the Solicitors Regulation Authority (SRA) becomes able to license solicitor-led ABS. Restrictions on invetsment and organisation have been removed and we will now begin to see the development of that more diverse and competitive marketplace. There are still many stages in the journey of legal services reform, but October 2011 marks another important step forward.